MEDIA DECODER; Newsweek Daily Beast Loses Support of Harman Family

By AMY CHOZICK

Published: July 24, 2012

In the middle of an attempted turnaround, Newsweek and The Daily Beast now face a future without the financing of the billionaire Sidney Harman, whose family said on Monday that it would no longer invest in the newsmagazine and Web site.

Newsweek and The Daily Beast had been owned jointly by IAC/InterActiveCorp and the estate of Mr. Harman, a stereo mogul. In April 2011, when Mr. Harman died at 92, his family pledged to continue his investment in the news organization. A family lawyer said then that the Harman family was ''totally committed to active participation and enthusiastic support.''

But on Monday, IAC confirmed that the Harman family would no longer invest in the magazine and Web site. ''The Harman family has indicated to us that due to the death of Sidney Harman, they do not plan to make further capital contributions to the venture, but will remain supportive partners,'' a spokeswoman said.

Reuters first reported that the Harman family would no longer support the venture.

The Harmans' withdrawal of financial support comes days before IAC releases its second-quarter earnings on Wednesday. Previously, the media company, which was founded by Barry Diller, had listed the Newsweek Daily Beast Company as an investment in unconsolidated assets. The company is expected to become a part of IAC's consolidated assets, filed into a category with other media holdings. IAC does not break out the magazine and Web site's financial performance.

Newsweek Daily Beast has struggled to find its financial footing. In 2010, Mr. Harman bought Newsweek from the Washington Post Company for $1 and a pledge that he would take care of its outstanding liabilities. He approached the magazine as a philanthropic endeavor and said he was willing to absorb the magazine's losses of at least $20 million annually. Mr. Harman said he hoped to come close to breaking even in three years.

In November 2010, IAC's Daily Beast, a cheeky Web site with political, foreign and celebrity news and commentary founded by Tina Brown, combined its operations with Newsweek. Ms. Brown, a former editor at The New Yorker and Vanity Fair, led the reintroduction of Newsweek last March.

The merger gave Newsweek a much-needed shot of adrenaline, but it also created havoc in the combined newsroom. A flood of high-level departures and firings at the Web site and the magazine followed.

Newsweek's circulation has fallen slightly this year, though its advertising revenue is up, according to industry estimates. IAC will now be tasked with supporting Newsweek and The Daily Beast, which by most estimates lost $20 million and $10 million in 2010, respectively. In the quarter that ended March 31, IAC, which includes Web sites like Match.com and CollegeHumor.com, reported that it had $776 million in cash and cash equivalents.

Mr. Diller said in an interview with The Times last November that Newsweek Daily Beast does not face financial difficulties and that the attempt to revive Newsweek is ''ahead of schedule.''

Mr. Harman's widow, Jane Harman, a former Democratic congresswoman from California, will remain on the Newsweek Daily Beast board.

This is a more complete version of the story than the one that appeared in print.